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Brits muddled over credit cards

More than two-thirds of credit card holders do not know the order in which their repayments are processed, new research has revealed. According to Nationwide, 69 per cent of people were unable to describe the repayment processing order, giving a variety of incorrect answers. While 26 per cent of those questioned admitted outright that they did not know the correct order, 18 per cent wrongly believed that the longest outstanding debt is paid off first. Some 22 per cent of people mistakenly thought that items with the highest interest are paid off first while four per cent believed that the most recent items were the first to be paid off.A further nine per cent incorrectly claimed they had control over the order in which items were paid off and only a sensible two per cent admitted they had no knowledge of the repayment system, as they only ever pay off the entire balance.This news comes as the Department of Trade and Industry announced that from October 2008, all credit card providers must publish the order of payments they use..Jeremy Wood, divisional director at Nationwide, commented: "Nationwide has long-campaigned for a positive order of payments for all credit card customers. Many credit card providers use low introductory rates to lure people into opening an account. These offers can look very appealing, but when you scratch beneath the surface you discover that credit card holders often don't receive the full benefit of these low rates. Most providers apply repayments to the cheapest debt first making it more expensive for you and more profitable for them."

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